Majority of manufacturers are falling behind the curve of the fourth industrial revolution and risking their survival

According to new research from KPMG International, the fourth industrial revolution (Industry 4.0 or i4.0) requires transformational change at a pace the majority of manufacturers are not matching. If manufacturers continue on the current trajectory, KPMG warns they are likely be disrupted by competitors and new market entrants. KPMG is calling for CEOs to form a top-down strategy and implement large scale change now in order to meet the realities of manufacturing in today’s market.

Commenting on the research, Doug Gates, Global Head of Industrial Manufacturing at KPMG, said:

“Few organizations have developed holistic, end-to-end interconnectivity – our definition of the highest level of i4.0 maturity – among today’s breakthrough i4.0 tools and technologies. Most are still at the beginning stages, where investment is made due to projected cost savings. The digital revolution is about so much more than efficiency, and manufacturers not embracing a new business model will likely face threats to their survival in the very near future.”

In the new report, A Reality Check for Today’s C-suite on Industry 4.0 – experimentation is ending, KPMG has identified a false sense of security held at the top levels of many manufacturers. As organizations implement single-project, bottom-up approaches to transformation – from physical plant changes, to integration of big data - the cost efficiencies are cited as proof of i4.0 transformation.

Companies may see their bottom lines increase in the short term, but KPMG has found that individual initiatives are proving to cost more and yield less in the longer term when business has to course correct due to the incredible pace of change experienced by the manufacturing industry.

Commenting on the research, Doug Gates, Global Head of Industrial Manufacturing at KPMG, said:

“We’re seeing organizations reap only marginal value from pilot projects that are disconnected from each other and a larger strategy. It’s similar to the person who stops taking their antibiotics early because they feel better – it may be ok today, but that shortsightedness is going to cause a more difficult problem to solve later.”

Instead, KPMG suggests manufacturers define what the organization needs to look like tomorrow to be competitive or disruptive. With that in mind, design a strategy with a detailed plan and create a culture that supports wholesale change from the bottom to the top. Organizations with that foundation are well placed to lead the change we are seeing in industrial manufacturing today.

With holistic business transformation the end goal, where do manufacturers start? KPMG offers four keys to i.40 transformation:

• Build the strategy from the corner office, not the plant floor.
  
• Redesign your organization from functional siloes to a value network.
  
• Create a dynamic culture that embraces the enterprise value of new digital technologies.
  
• Throw out your current KPIs; it’s time to rethink how to measure success.
  

Says Gates:

“If manufacturers aren’t well on their i4.0 journey by 2020, they will have a problem keeping up with new market entrants. They don’t have to have completed the journey, but they must have the foundation in place: a strategic approach, a holistic plan of transformation and the right culture to embrace change.”

Click to learn more about the research and read details on the keys to success.